Vancouver is now Canada’s top hotel market, posting nation-leading occupancy levels and revenues — and investors are checking in with multimillion-dollar buys.
Last year, B.C. claimed a 24 per cent share as national hotel transactions hit $1.4 billion, stretching an eight-year string of property sales of more than $1 billion, according to Colliers Canada’s 2015 Canadian Hotels Investment Report.
January’s $168 million sale of the Delta Hotels and Resorts portfolio by the British Columbia Investment Management Corp. to Marriott International and the sale a month later of the Fairmont Hotel Vancouver to West Vancouver-based
Larco Hospitality for $180 million indicate another blockbuster year is emerging, analysts say.
“Vancouver is now the number one hotel market in Canada, followed by Toronto,” said Bill Stone, executive vice-president of CBRE Hotels.
In the first quarter of this year, downtown Vancouver hotels posted an average occupancy rate of 69.5 per cent, highest among all major cities. More telling, the average revenue-per-available room (REVPAR), a key industry metric, surged 17 per cent to $111.13, the sharpest increase in the country.
As a comparison, REVPAR fell 11.5 per cent in Calgary and dropped 4.5 per cent in Toronto compared to a year earlier.
It now costs an average of $160 for a downtown Vancouver hotel room, up nine per cent from a year ago, according to industry analysts PFK Consulting Ltd.
Landmark sales in B.C. last year included the Fairmont Empress Hotel in Victoria, sold to Vancouver developer Nat Bosa for $48 million, and the purchase by Innvest Real Estate Investment Trust of Vancouver’s Hyatt Regency Hotel for $140 million.
In the first quarter of this year, nearly $600 million in hotel deals closed across Canada and some big deals are looming.
One of the largest is the portfolio of 23 hotels that Fortis Inc. is selling, including a Holiday Inn conference hotel in Kelowna and 10 properties in Alberta.
“We’re definitely now a market that is a $1-billion plus in hotel investment activity in what historically used to be $500 million [annual] average and we see that continuing,” said Alam Pirani, Colliers Canada’s executive managing director and head of its Canadian hotel group.
Pirani sees no slowdown in sight.
“Operating fundamentals are strong, the cost of debt is at an all-time low and there are more debt players that are participating in our sector than ever before,” he said.
A major shift is the pullout of some heavy hitters such as pension investor Ivanhoe Cambridge, which sold both the Fairmont Empress and the Fairmont Hotel Vancouver, and Fortis, and the mergers of others.
Orange Capital and Kingsett Capital have bought into Innvest REIT and launched an aggressive acquisition campaign, which includes taking an 80 per cent share of the Fairmont Royal York in Toronto and Vancouver’s Hyatt.
Stone said that, while the big players are getting the attention, the entire hotel market is buoyant.
“Almost 75 per cent of the hotel sales are deals under $10 million,” Stone said from his Toronto office, “There are a lot of private deals taking place.”
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